VIC 800-900K Melbourne - Reservoir house or South East villa unit?

Hi!

I'm buying my first house in Melbourne and thinking of rentvesting - buy an investment property in the middle suburbs with good long term capital growth (don't want to live there), and rent an inner city apartment for me. (Will live in the IP the first year and every 6 years to use main residence exemption for CGT).

Still need to do the sums, but assuming I could afford these options (and the associated shortfall in rent with high growth properties), what would you choose for long-term capital growth (10+ years):

1. 3-4 bed house in Reservoir/Pascoe Vale. Worse/less affluent suburb but get house + land.
2. 2 bed house in Coburg/Preston/Brunswick/Moonee Ponds that needs some work. Better suburbs but still not as affluent as South East, and smaller house/land than Reservoir.
2. Villa unit or townhouse in South Eastern suburbs (Caulfield, Carnegie, Bentleigh, Highett, Cheltenham, Parkdale, Mordiallic, Surrey Hills) - ideally 3 beds, maybe 2 beds if closer to town. More wealthy blue chip suburbs but can prob only afford villa unit/townhouse which generally don't grow as much as houses (but Michael Yardney says a unit in South East is better than a house in a non-blue chip suburb long term!?).

Also considered regional like Ballarat/Bendigo or interstate, but I don't think I can handle living there so not really an option. Also don't want to be priced out of the Melbourne market for the future.

Haven't done enough research into my budget or house prices yet, so these might be off, but you get the rough idea.

Or any other ideas?

Thanks!

 

The median price in Moonee Ponds is higher than Highett, Cheltenham, Parkdale, Mordiallic and about the same as Carnegie and Bentleigh.

I would choose to live in Moonee Ponds over any of those but good luck getting a house on land for under a mill there. As an IP though I'll leave that up to the experts.

 

What sort of land sizes can you get with your budget with those first two options?

I live in the South East and villas have done terrifically in the last couple of years (Carnegie, Murrumbeena) and the council are not permitted any more of those type of dwellings. I wonder if they’ve had their run though.

 

Irrespective of where you buy the house, I highly doubt you'll move back into it in 6 years time. So I don't place too much priority on that aspect.

Given it sounds you want to move in now then that does rule out the interstate or regional options. That's all fine.

The main thing I'd mention is to use a loan with an offset account.

The future is hard to predict. In four years time you might decide to buy a place and move into it.

 

I have the same question with OP, albeit on a smaller budget ($700k - $750k).

Inner North/ West (Yarraville, Footscray, Wefo, Maribyrnong, Coburg North, Avondale Heights) townhouse vs Unit in Southeast. I really like Oakleigh South in particular.

One thing I do notice, the SE units usually come with more space and low/no body corporate (the old style villa). Inner West townhouses are usually of high density, look like the devs tried the best to split the original lot into as many houses as possible.

 

I like your optimism that you can pick up a 2 bedroom house in Moonee Ponds or Brunswick (assuming you mean 3055, 3056 and 3057). Yes there are some properties with quoted ranges in your budget but IF any sell within your budget they’ll need a LOT of work.

A sweet spot might be a townhouse if those are areas you’d like to live (they are all fantastic as an inner city option).

Likewise a 3 bedroom house in Pascoe Vale. Not likely, but that’s due to the larger blocks there.

A 2 bedroom house on a tiny block in Coburg might be within your reach.

As for a villa in the south east, personally I’d aim to buy something non-strata in the area closest to where you’d be happy to live. Rentvesting is a bit silly if it’s in a fairly similar area to where you’ll be living. My 2 cents

 

So what returns are you expecting from each option? Shouldn't that drive your investment decision and why you think it will somehow outperform where you chose to live after tax? The main residence exemption is a very important benefit you must weigh up when you are buying in expectation of significant capital growth.

also you can't buy an entire suburb. Each home is different and has its own qualities. Better off being more specific by providing examples of what you are comparing.

Good luck

 

Freestanding three-bedroom house (especially brick)

 

Thank you for your replies. I have done some more research and realised I definitely overestimated what I could get for that budget haha.

New options are:

1. Geelong 3 bed (rentvest - need to check I have the cashflows to hold it first obviously. Assuming I do, is this the best capital growth option?)

2. 2 bed Northcote/Thornbury townhouse or Carnegie villa unit (is rentvest or PPOR better? Not fav location/type of house for PPOR but could prob deal with it. Like someone said, would probably be silly to rentvest if I was just living in an apartment in South Yarra I assume?)

3. South Yarra apartment (PPOR - where I want to live but prob terrible for capital growth and future options. Would a nice art deco apartment be good for capital growth or still the townhouse/villa unit a little further out is better?)

What would you do if you were me?

 

I won't buy any of those and will do more research

 

Geelong established suburbs are just as expensive as Resevoir…

Geelong troubled suburbs: Norlane and Corio, having visited them I think they are on par with Broadmeadows. I notice people down here purposely avoid them and either go up to Lara or go down to Grovedale, Charlemont, Armstrong Creek. But I’m not sure if these new suburbs are your cup of tea, they have lot of land still, so lack the scarcity factor.

 

What's wrong with these? Options 1 and 2 are what a local buyers agent suggested. What kind of options would you be looking at instead?

 

Ever lived in an Art Deco apartment? Do you like hearing EVERYTHING your neighbours are doing? If you decide to do it, get the top floor

That was me. And yes I think it’d be silly. But that’s my view at least. I absolutely love being able to do what I want to my own house and not having to move, ever.

I’ll add in that I was in a similar boat to you. Apartment where I want to live vs house further out. Yep I should’ve bought that house in Preston/Reservoir instead of that 2 bed apartment in Brunswick. You can guess what happened next lol. But I’m glad I live in the place I bought. Could never rent again.